Business Highlights

AP News
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Posted: Sep 21, 2011 6:22 PM
Business Highlights

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Fed to shift $400 billion in holdings to boost economy

WASHINGTON (AP) _ The Federal Reserve will use more than $400 billion to try to drive down long-term interest rates, make home and business loans cheaper and invigorate the economy.

Analysts said the moves would provide only a slight economic benefit.

The action the Fed announced Wednesday is modest compared with previous steps it's taken. The Fed won't expand its $2.9 trillion holdings; it's just rebalancing them.

It will sell $400 billion of its shorter-term Treasurys to buy longer-term Treasurys by June 2012. And it will reinvest principal payments from its mortgage-backed securities, to help keep mortgage rates at super-low levels.

Fed policymakers announced the moves after a two-day meeting. Three members out of 10 dissented from the decision. The Fed acted despite criticism from Republicans who have warned that such steps could ignite inflation.

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IMF: Financial risks rising in US and Europe

WASHINGTON (AP) _ The International Monetary Fund says the global financial system faces more challenges than at any point since the 2008 financial crisis.

Europe's debt crisis is spreading to its banks, which hold government debt and may be forced to pull back on lending to conserve cash, the lending organization said Wednesday.

The U.S. economy is being restrained by its depressed housing market. Many homeowners owe more on their mortgages than their homes are worth. That has limited their ability to spend and is holding back growth.

The IMF urged European banks to raise more capital to shore up their finances. If necessary, governments should provide it. And it said the U.S. government should help homeowners reduce their mortgage debt.

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Mulling Meg Whitman: HP considers CEO shakeup

SAN FRANCISCO (AP) _ As trial balloons go, Hewlett-Packard's not-so-secret handwringing _over whether to dump CEO Leo Apotheker and replace him with former eBay CEO Meg Whitman_ was a success. Investors like the idea. News that the company's board is mulling a leadership change pushed the stock up more than 7 percent on Wednesday.

Investors were heartened somewhat by the yet another turnaround strategy at one of Silicon Valley's oldest, but most publicly dysfunctional, firms. Since joining HP in November, Apotheker's strategic decisions have been drastic, and have done little to inspire confidence. HP's stock is down nearly 50 percent since he took the helm.

HP is facing a classic big-company problem: How to meaningfully grow revenue. But it's also facing an identity crisis. The company's trying to figure out whether it works best as a technology conglomerate that can be all things to all customers, or as a more streamlined operation that does only a few things well.

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Facebook users: Get ready for more changes

NEW YORK (AP) _ Facebook is at it again. The social network is tweaking the home pages of its 750 million users, much to the chagrin of some very vocal folks.

The world's largest online social network is expected to announce even more changes on Thursday, when it holds its annual f8 conference in San Francisco for developers who create games and other applications for its site.

The gathering follows a trickle of changes to Facebook in the past few of weeks. Some, such as larger photo displays and a feature that makes it easier to group friends into categories, were met with approval _ or at least silence, which in the age of social-media oversharing could well be considered an endorsement.

Then came Wednesday, when many users woke up to find their homepages altered, with what Facebook calls "top stories" on the top of their pages, followed by "recent stories" listed in chronological order. By mid-morning, the words "new Facebook" quickly became one of the most discussed topics on Twitter. Many comments were negative, though some pointed out that Facebook makes many changes to its site and people eventually get used to it.

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Google head disputes that company thwarts rivals

WASHINGTON (AP) _ Google Inc. Executive Chairman Eric Schmidt told a Senate panel Wednesday that the company faces tough competition and isn't using its dominance in Internet search to stifle competitors.

Schmidt is testifying at a hearing examining whether Google is abusing its power to thwart competition by placing links to its own content and services at the top of search results to the disadvantage of its rivals' links.

Schmidt told lawmakers that the Internet search giant won't make the same mistakes as Microsoft Corp., which was curbed by the government several years ago when it was deemed to be exercising monopoly power.

Consumers will correct mistakes the company makes, he said. Schmidt insisted that Google could easily be unseated by better technology because competition is only a "click away" on the Internet.

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In the US, two housing markets and two directions

In America, it's starting to feel as if there are two housing markets. One for the rich and one for everyone else.

Consider foreclosure-ravaged Detroit. In the historic Green Acres district, a haven for hipsters, a pristine, three-bedroom brick Tudor recently sold for $6,000 _ about what a buyer would have paid during the Great Depression.

Yet just 15 miles away, in the posh suburban enclave of Birmingham, bidding wars are back. Multi-million-dollar mansions are selling quickly. Sales this August were up 21 percent from the previous year. The country club has ended its stealth discounts on new memberships. And Main Street's retail storefronts are full.

Think of this housing market as bipolar. In the luxury sector, the recession is a memory and sales and prices are rising. But everywhere else, the market is moving sideways or getting worse.

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Home sales jump 7.7 percent as foreclosures rise

WASHINGTON (AP) _ The number of Americans who bought previously occupied homes rose in August. But the sales were driven by an increase in foreclosures, a sign that home prices could fall further next year and slow a housing recovery.

The National Association of Realtors said Wednesday that home sales rose 7.7 percent last month to a seasonally adjusted annual rate of 5.03 million homes. That's below the 6 million that economists say is consistent with a healthy housing market.

Last month's pace was slightly ahead of the 4.91 million sold in 2010, the worst sales level in 13 years.

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Moody's cuts Bank of America, Wells Fargo and Citi ratings

NEW YORK (AP) _ Three of the nation's top banks are likely to start paying more to borrow money.

Moody's Investors Service on Wednesday lowered its debt ratings for Bank of America, Wells Fargo and Citigroup. The ratings agency said it has become less likely that the U.S. government would step in and prevent the three lenders from failing in a crisis.

The downgrades were widely expected after the ratings agency placed the three banks on review in June. The cuts also stem partly from new laws taking effect under the Dodd-Frank Wall Street Reform Act. The new law ended the possibility of the government bailing out a large financial firm and created a process that would allow a financially troubled bank to fail and liquidate its assets.

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High costs weigh on General Mills first-quarter profit

NEW YORK (AP) _ General Mills Inc.'s fiscal first-quarter net income fell 14 percent as one of the nation's biggest food companies continued to deal with high ingredient and energy costs. But adjusted results beat Wall Street's expectations as revenue climbed on increased prices, solid consumer demand and new products.

The Minneapolis-based company that makes Cheerios cereal and Haagen-Dazs ice cream also reaffirmed its full-year adjusted earnings outlook. On the news, its stock gained $1.26, or 3.4 percent, to $38.75. The shares have traded between $34.54 and $40 over the past year.

General Mills, like nearly all food companies, has raised prices to offset higher costs for commodities from corn to fuel. But the company _ like others in the sector _ has had to weigh its price hikes against just how much shoppers are willing to absorb. Consumers remain cautious about their spending in the uncertain economy.

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Bill Gates tops Forbes list of richest Americans

LOS ANGELES (AP) _ The nation's economic woes don't appear to be hurting Bill Gates, who tops Forbes' list of the 400 richest Americans for the 18th year in a row.

The magazine said Wednesday that the Microsoft co-founder and philanthropist's wealth amounts to $59 billion, ranking him ahead of all the other billionaires who make up this year's list.

Gates' fortune swelled by $5 billion from a year ago, outpacing the No. 2 on the list, Warren Buffett, whose net worth is $39 billion, Forbes said.

The Berkshire Hathaway Inc. chairman and CEO's fortune decreased by $6 billion _ the largest dollar-amount loss by anyone on the Forbes 400 this year, the magazine said.

Oracle CEO Larry Ellison rounds out the top three richest Americans with a net worth of $33 billion, $6 billion more than last year.

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By The Associated Press(equals)

The Dow Jones industrial average lost 283.82 points, or 2.5 percent, and closed at 11,124.84. The Standard & Poor's 500 index fell 35.33, or 2.9 percent, to 1,166.76 The Nasdaq composite fell 52.05, or 2 percent, to 2,538.19.

Benchmark crude gave up $1 to finish at $85.92 per barrel in New York. Brent crude, used to price crude from foreign countries, fell 18 cents to finish at $110.36 in London.

In other energy trading, heating oil dropped 2.74 cents to end at $2.9342 per gallon, while gasoline futures lost 3.49 cents to finish at $2.6665 per gallon. Natural gas fell 6.8 cents to end at $3.73 per 1,000 cubic feet.